Buffett's Credit Crisis Insight

Nuclear Power the ONLY Real Alternative

In light of the food shortages caused in part by alternative foods, nuclear power is becoming the only real feasible alternative energy source. Currently wind and solar can't create the capacity needed, once again bringing us back to Nuclear Energy. Even the founder of Greenpeace believes it's time to assimilate it as an alternative. The exchange-traded fund for Nuclear Power is NLR, which gives you a way to profit.

Liquidity Translation

The Fed continues to open up liquidity through the Fed window and lower interest rates but what has it done for the banks? The banks are able to work their day to day functions but they haven't opened up their own lending windows.

The Cure for High Oil Prices

Can more regulation and more taxes somehow bring down oil prices? What in the heck are they thinking in Washington. Commodities and stocks work in long-term 18 year cycles. That is what happened in the 1900s, 1930s, 1970s, and today. It isn't government conspiracy or Bush and his big oil friends who want to drill in Anwar it is demand from China and India coupled with a weak dollar. This is the price we pay when 3rd world countries progress and our Monetary policy makers lack backbone. Rejoice in the wealth being built in these countries and realize eventually, supply will meet demand through new wells, efficiency gains, and alternatives. It is not an over night fix so be ready to endure high inflation for quite some time. There are plenty of ways to profit from this commodity boom so become educated. Read the not so well written but sufficient book "Hot Commodities" by investing legend Jim Rogers!

Interesting side note, the week of Black Thursday just before the Great Depression, congress was holding hearings on how to tax the railroads for their "windfall profits". You gotta love government. I bet if you looked back in 1999 when oil was trading around $11 a barrel congress was looking for a way to subsidize the oil companies to keep them afloat. Sometimes you get the bull like these oil guys are now, sometimes you get the horn like they did in 1999 and couldn't stay in business.

The Road to end Free Markets

Congress is tripping over themselves to give the Fed more power to tinker with the economy. The so-called free market and financially smart Republicans have turned there back on the Milton Friedman's lassiez-faire economic policies that so many claim to hold to. The Democrats are in line to play a little one-up-manship to take the regulation as far as they possibly can.

Why can't we accept recessions as a normal part of life, as a healthy shake out, as way the invisible hand disciplines the ignorant the greedy. Congress reminds me of the parent who won't allow a child to feel the weight of the consequences of their choices and then can't figure out why the child is such a loser when faced with life on his/her own.

Fed Speculation

The market is rallying this morning in anticipation of the Fed announcement. This kind of excitement tells me anything less than a full point will disappoint and probably lead to a sell off. Of course another interest rate cut in front of today's inflation news seems foolish to me. It supposedly takes 6 months for a cut to take affect. Cutting rates won't make banks lend money. Cutting rates won't raise consumer confidence. I sure miss Reagan's strong dollar policy that fed the markets through 1980-90s creating one of the largest bull markets the country has ever seen.

Fed's Sunday Surprise

The Fed cut the discount rate today instead of waiting all the way to Tuesday when they will most likely cut the overnight rate another half a point. Finally some are saying enough is enough. That's what we were saying at the end of last year when the Euro was only 1.25 of the dollar.

****Spitzer Alert****

This just in!!! A new picture has surfaced on Spitzer!! See for yourself. I think it looks real. Don't you???


You Be The Judge!!

Innocent till proven guilty but he may get a piece of his own medicine. Payback is a @#$%&! But you really can fault a guy in getting his oo-mox on, right???

CLIENT Number 9

If you have been under a rock today or haven't been able to read the news headlines today, you have missed the next new episode of Law and Order. You really can't make up this stuff some times and people really don't think things through no matter how smart they are.

Governor Elliot Spitzer of New York City is on the verge of resigning today because he was caught in a prostitution ring sting. He just talked with reporters about how he needs to work on and focus on gaining his families respect and trust back. Well, that may be difficult since he was such a "defender of truth" in his prosecution days.

Many on Wall Street, you can hear cheering and possibly chanting "ding dong the witch is dead!" I think he will need to resign his post as governor of NY in his 345th day of governorship.

Spitzer and the Witch from Wizard of Oz (Don't they seem similar?)

How can he think that he could get away with it being in a club called the Emperors club that sets up these prostitutes for high net worth clients. Also, on one of the busiest days of the year when individuals cheat on their spouse and government monitoring of this day for those cheats, February 13th (day before valentines day), you would think that this guy would know better. I guess that is why some in New York got the feeling that he had the "god" complex or untouchable air about him. I don't know him but this isn't good and must go down in a idiot-in-charge stupidity.

Again, there must be someway to make something off of this event. That is just how good Ferengi's think. I know others will. It is too bad but I think that all those that have been wronged by this guy, should have some fun and reprocussion on. All is fair in love and money!!! Have fun you Wall Street guys!!!!!!! Law and Order writers, you have an easy script here. Have some fun with it too.

My EUR/USD Trade

Ok, so the Dollar keeps on getting hammered and the Euro just keeps on going up higher and higher. As you know, I have been bullish the Euro for a little while and have been doing well since 1.4600 on the pair. I was bearish for a short while but ended up going long again and set up a limit sell order at 1.5450 if the pair just shot up. Well, it shot up and I got out of my position at 1.5450 because of my order I had set up on it. I am a happy camper with all my latnium.

Going forward, I still see some bullishness around it as the dollar still weakens. There is talk now of the Fed possibly having an emergency cut because of the markets. I can't see it helping much and only postponing the inevitable. I definitely think that we are in a recession and even though we are no where like the 1920s, it still is a for of recession. In a article that is from 2006 on when recessions may have happened in the past, goes to show that we may be in a small one right now. This article goes into some good information on the make up of these recessions.

Now, my Ferengi side tells me that there is money(latnium) to be made in this time of crises. And that is what I am doing. I just have to be against the dollar till there is something that convinces me that it is turning around. Who know, maybe the dollar will become the new currency carry trade. Remember, making and getting latnium is the" true" oo-mox experience!!!!

Intercepted Fed Communications

Ferengi Traders have recently intercepted a communication to the Federal Reserve. The author of the letter has yet to be ascertained but the content is very relevant.

Dear the Fed,
You suck. You don't have a backbone and as a result you are slowly and
very surely making our country and our currency irrelevant. Usually the
masses rebel and bring down great empires but luckily for us democracy
fixed that problem. Unfortunately, democracy can't fix how lame and
fickle you are and so you will be our ruin.
A few things to tell you:
1) Inflation isn't 2% like your pathetic CPI ex-Food & Energy says it
is.
First of all, as far as I can tell food and energy are the only two
items you should NEVER exclude from an inflation index. Tell your wife
and kids they can have everything in the consumer basket except food and
energy and you will quickly see that they are actually the two MOST
important and indispensable factors in the CPI. You can find substitutes
for, or go without, everything in the basket EXCEPT those two.
Secondly, stop using "Seasonally Adjusted Intervention Analysis" it's as
sketchy as the Seldom-Accepted-Accounting-Principles (SAAP) we use to
cook the books here at LoS. I mean writing a computer program to
automatically remove any items in the basket which deviate meaningfully
from the previous year? Isn't the point of the data to SHOW the change
versus the previous year not hide it? Oh, I found the list of items that
you've adjusted for and it's embarrassing.
The majority of adjustments remove price increases with much less
frequent adjustments for price declines. You've basically left dairy
products out of the index for the last 5 years citing outrageous
one-offs like "a generally tight cheese market" as justification for
this. And as if reporting a separate ex-energy index wasn't enough
you've statistically intervened to remove the effect of higher energy
prices even in the index that's supposed to INCLUDE energy. In one
outrageous case you removed the effect of fuel oil for three months in
March 03 and the reason you cited for the "abnormal"
move was the "end of winter," yeah I was surprised as sh-t when winter
ended in Spring 03, it was wild! For a real measure go back to the old
method, you'll see inflation is at least double what you're reporting.
2) Grow a spine you slimy invertebrate
The market has a memory. Over the past 15 years you trained us to
believe that no matter how much risk we take, and how much we lever that
risk, if anything really scary comes down the pike then you will bail us
out. Now we all run around like reckless, spoiled 16 year olds bidding
up the price of anything we can get our hands on and not worrying about
consequences because daddy (Greenspan) and mommy (Bernanke - that's
right you're spineless AND a girl) will get us out of any trouble we get in.
Well you're only making the problem worse and we aren't learning anything so
we'll continue taking stupid leveraged bets creating bubble after bubble so
you can tip-toe around trying not to pop any of them.
3) You're lying to yourself if you think we still have real GDP growth
in this country.
I challenge you to find one measure of wealth OTHER THAN THE DOLLAR
which shows the US economy as worth more now than in 2001. If I wanted
to buy our country it would cost me 30% fewer euros today than it did in
2001, it would cost me less bars of gold, less barrels of oil, less ounces of copper,
less btu's of natural gas, less cubic feet of lumber, less of almost anything that has
intrinsic value. Yet you keep reporting GDP growth, why? Because your quick fix
is to effectively print more money so that in dollar units everything is getting more
"valuable". But guess what, to the 95% of the world that doesn't use dollars the true
value of the US economy has been shrinking, rapidly.
It's like a company doing a 5 for 4 reverse stock split every year and
claiming to have 20% eps growth, you haven't changed the earnings just
the units those earnings are measured in. The rest of the world is
telling you our country is worth less by massively selling our currency
and you still naively think we're growing value - I feel like I'm at a
gathering of the flat earth society or in Zimbabwenomics 101.
This will come back to bite you but not nearly as much as it bites us.
The cheaper the dollar gets the more expensive all our imports get,
inflation will rise faster than you can statistically manipulate it and
when that happens expected inflation goes through the roof (which as you
yourself have pointed out many times is by far the most serious threat
to economic existence). Then the only way out will be interest rate
increases as swift and severe as all the cuts have been. All the bubbles
will pop at once and then we're really in for it. Maybe it's 10 years
away but there's a toll collector at the end of every free ride.
When will you learn that recession is ok? It's actually healthy, it's
the cycle, it's how things have worked for a 1,000 years. Trying to
prevent every small recession is going to end in one huge recession (ie.
depression) and no one will trust you anymore which is a much bigger
problem. No economy in history has ever been able to successfully
inflate its way to health, this won't be any different.
Benny, I know you had to trade in your hypothalamus and spine to be fed
chairman and now you biologically over-react to everything and are
incapable of standing up straight when confronted by bully-morons like
Kramer. But I'm hoping you at least still have your brain. Before you
had this job all your published research showed that central banks
should strictly target inflation and should be ignorant of asset prices.
You had good reasons for this conclusion, don't forget them.

Subprimely,

Long or Short Capital Management

Bernake: The Dollar Destoyer!

So the word on the street today is the Fed may once again reduce rates. Earthlings have become so scared of a recession that they are willing to destroy the value of the dollar to just delay the inevitable. Look, like it or not we are going into a recession. Short sited Earth bankers and borrowers were willing to lend money to any homo-sapien that could fog a mirror and they are just afraid to let banks pay the consequences. Where are the Milton Friedman lasse faire economists? Why are they so afraid to let the foolish businessmen take their lumps (Ferengi are not responsible for the stupidity of other races)? New financial leaders will rise out of the ashes and they will be all the wiser because of it.

The Ferengi watched in admiration of President Ronald Regan and his understanding of a strong dollar policy, "The Dollar will be as good as gold" was the cry then. Aren't all these FOMC people suppose to be your so called Regan Republicans? Why are they so willing to let the dollar die on the vine?

Money in the currency market flows to the country that is usually paying the best savings rates. The US was the envy of the world and the dollar was strong all through the 80-90s, the strong dollar policy helped the US lead the world in development and strength. Every time Bernake seeks to lower the interest rate to cave to Wall Street traders he further weakens the dollar. Interest Rates are still at very historical lows, maintaining the current rate will at least help to stabilize the dollar. There is no cure for the housing market just give it up already. Let the market shake out and run its course.

In 1929 where we faced similar economic issues and the Fed increase the interest rates in order to strengthen the dollar and combat inflation but then sparked the worst sell off in the stock market. In 1998 the Fed had a similar liquidity crisis thanks to the "genius" of Long-Term Capital Management and all the banks that lent them money. The Fed increased liquidity by lower interest rates at the time to bail the banks out, but the dropping commodity market and deflation made the economic situation favorable for the time and the cuts didn't hurt. This time we are in a harder situation because earth has a liquidity issue created once again by the ridiculous bankers lending for any reason, but the cutting of the interest rates is perpetuating inflation and an already bullish commodity market. Raising interest rates to combat the inflation may put us into 1929 decline but lowering the rates puts into 1970s type inflation. The only logical course from my point of view is to just leave the rates alone. Quit tinkering with it. Allow this economy to play its way out.

Bernake believes that the rest of the world is going to eventually fall into recession just like the US so the rate cuts will eventually be countered by the cuts in other countries. The world is bigger than it used to be. New large consumers like China and India may not bring the kind of slow down we expect. Countries like Canada, Mexico, Australia, and Russia who are profiting from the skyrocketing commodity prices and may make up much of the consumption the US will slack off on because wealth is increasing in those areas. Bernake may very well be right but it seems to me he is spinning the revolver with a few extra rounds.